Callisher v Bischoffsheim (1869–70) LR 5 QB 449

A claimant forbore from suing a government for a debt he honestly believed was owed, in return for a promise of payment from the government's agent. The court held that forbearing to sue on a genuinely held, albeit potentially invalid, claim constitutes good consideration.

Facts

The plaintiff, Callisher, alleged that a sum of money was due to him from the government of Honduras and was planning to take legal action to enforce his claim. The defendant, Bischoffsheim, was the agent for the Honduras government. In consideration of the plaintiff forbearing from taking proceedings for an agreed period, the defendant promised to deliver to him a set of Honduras railway loan bonds. The plaintiff duly forbore from initiating his claim for the specified time, but the defendant failed to deliver the promised bonds. The plaintiff sued for breach of this agreement. In his defence, Bischoffsheim pleaded that at the time of the agreement, no money was actually due from the government of Honduras to Callisher. Therefore, he argued, the plaintiff’s forbearance was in respect of a wholly unfounded claim and did not constitute valid consideration for the defendant’s promise.

Issues

The central legal issue before the Court of Queen’s Bench was whether forbearance to sue on a claim, which is honestly and reasonably believed to be valid but may in fact be unfounded, can amount to good consideration to support a contract. The court had to determine if giving up a ‘right to sue’ that might not actually exist was a sufficient detriment to the promisee or benefit to the promisor.

Judgment

The court unanimously found in favour of the plaintiff, holding that the forbearance constituted good consideration. The judges reasoned that the compromise of a disputed or doubtful claim is of value, and giving up the right to have such a claim litigated is a valid legal detriment.

Reasoning of the Court

Chief Justice Cockburn drew a crucial distinction between a claim that is known to be frivolous or vexatious and one which is held in good faith. For a claim held in good faith, forbearance is good consideration, regardless of its ultimate success.

The authorities clearly establish that if an agreement is made to compromise a disputed claim, forbearance to sue in respect of that claim is a good consideration; and whether the claim is good or bad is not material, provided it is not frivolous or vexatious… Every day a compromise is effected on the ground that the party making it has a chance of succeeding in it, and if he bona fide believes he has a fair chance of success, he has a reasonable ground for suing, and his forbearance to sue will form a good consideration. When such a person forbears to sue he gives up what he believes to be a right of action, and the other party gets an advantage, and, instead of being annoyed with an action, he gets the claims settled at once.

Justice Blackburn concurred, emphasising that the reality of the consideration is not the certainty of the claim, but the plaintiff’s bona fide intention to pursue it.

If an intending litigant bona fide forbears a right to litigate a question of law or fact which it is not vexatious or frivolous to litigate, he does give up something of value. It is a mistake to suppose it is not a detriment to the plaintiff to give up the right of determining the question in his favour… I agree that if the plaintiff knew that he had no real claim, his forbearance to sue would not be a good consideration.

Implications

The decision in Callisher v Bischoffsheim is a landmark authority in the English law of contract on the doctrine of consideration. It firmly established that the compromise of a doubtful claim, or forbearance to sue on a claim which is honestly believed to be valid, is sufficient consideration to support a promise. This prevents a party who has made a promise in a settlement agreement from later escaping liability by proving the original claim against them was invalid. The case is fundamental to the enforceability of compromise and settlement agreements, as it encourages parties to resolve disputes out of court by providing legal certainty to their bargains. The key principle is the good faith of the person forbearing; a promise not to enforce a claim known to be baseless would not be good consideration.

Verdict: Judgment for the plaintiff; the forbearance was held to be good consideration for the defendant’s promise.

Source: Callisher v Bischoffsheim (1869–70) LR 5 QB 449